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Jordan Fuller, Zach Greene, Courtney Starzer, Pallavi Somani, Lifeng Wang
Strategic Recommendation:Global Expansion
MAJOR STRATEGIC CHALLENGE : Global Expansion
RECOMMENDED SOLUTION: Enter European market through Foreign Direct
Investment (FDI) + retail and athletic partnerships
Under Armour Primarily Competes in the U.S. Athletic Apparel Industry
INDUSTRY FOCUS:• provide
sportswear for customer performance, comfort, and fashion needs
GROWTH FACTORS: • lifestyle changes• active seniors• activity needs• attire trends
Source: Freedonia Focus Reports: Athletic Apparel – United States
The Industry Consists of Many Companies with Similar Product Offerings
BRANDS Nike Adidas Columbia Puma LuluLemon Patagonia
ATHLETICAPPAREL
X X X X X X
ACCESSORIES X X X X X X
PERFORMANCE APPAREL
X X X - X X
Str
ateg
ic G
rou
ps
The Industry is Highly Competitive and Relatively Unattractive to Enter
Threat of Substitutes
Bargaining pow
er of buyers
Barg
aini
ng
pow
er o
f su
pplie
rs
Intensity of RivalryThreat of New
Entrants
Medium-High
High
Low
MediumHIGH
Under Armour Resources and Capabilities
Valuable Rare Stable Inimitable
Brand
Management
Sponsorship
Technology
Engineers
Shelf Space
Stores
Licensee
The Continued Strength of the Firm Depends on Competitive Advantages
InnovativeFirst Mover
High QualityProducts
Marketing Strength
Current Competitive Position: STRONGHowever… intense competition makes the company vulnerable
Solid Relationships with Retailers
Under Armour is Facing Three Major Challenges
Corporate Challenges
Footwear Line Development
1) Market Dominance by Nike
2)Negative Initial Reviews
International Expansion
1) Low Brand Awareness abroad
2) Lack of managerial capacity
3) Uncertain of customer preferences
Increase Direct Retail Presence
1) Capital Intensive2) Labor Intensive
International Expansion is the Most Important Challenge to Address
Fast growing market
segment
Variety of popular sports in Europe
Sponsorship deals with soccer and rugby clubs
Nike losing apparel
market share in Western
Europe
Pros Cons
Foreign Direct Investment(FDI)
Elevate brand image Lack of local knowledge
Partnership Local knowledge supply Dependence on counter party
Licensing Prior success experience
Limited expansion potential
Three International Expansion Strategies Comparison Chart
MadridBarcelonaLondonTottenhamHannoverFrankfurtRomeLisbon
The Key to SuccessAthletic and Retail Partnerships
2013 Europe
Sponsorship
Flagship Stores
2015 Rugby World Cup
Product Modification
2014 Asia & Brazil
World Cup Campaign
Product Innovation
2016 Emerging Markets
Utilize Previous International Experiences
Our Game Plan Across the World
Brand Image:Superior
Performance Wear
Product Line:
New Innovations
for New Markets
Financials:
$886 Million Revenue
$58 Million Net Income
Projected Tangible and Intangible Results
Appendix Begins
So does a new chapter of Under Amour Inc. International
Raw data(In thousands, except per share amounts) 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001
Statements of Income data:
Net revenues 1,472,684 1,063,927 856,411 725,244 606,561 430,689 281,053 205,181 115,419 49,550 19,732
Cost of goods sold 759,848 533,420 446,286 370,296 301,517 215,089 145,203 109,748 64,757 26,329 9,348
Gross profit 712,836 530,507 410,125 354,948 305,044 215,600 135,850 95,433 50,662 23,221 10,384
Selling, general and administrative expenses 550,069 418,152 324,852 278,023 218,779 158,682 100,040 70,280 40,709 18,908 7,035
Income from operations 162,767 112,355 85,273 76,925 86,265 56,918 35,810 25,153 9,953 4,313 3,349
Interest & other expense, net -3,841 -2,258 -2,344 -850 749 1,457 -2,915 -1,283 -2,214 -894 -305
-2,064 -1,178 -511 -6,175 2,029 712 -79 -226
Income before income taxes 156,862 108,919 82,418 69,900 89,043 59,087 32,974 24,096 7,739 3,419 3,044
Provision for income taxes(1) 59,943 40,442 35,633 31,671 36,485 20,108 13,255 7,774 1,991 653 36
Net income 96,919 68,477 46,785 38,229 52,558 38,979 19,719 16,322 5,748 2,766 3,008
Growth ratesNet revenues 38.42% 24.23% 18.09% 19.57% 40.84% 53.24% 36.98% 77.77% 132.93% 151.11%Cost of goods sold 42.45% 19.52% 20.52% 22.81% 40.18% 48.13% 32.31% 69.48% 145.95% 181.65%
Gross profit 34.37% 29.35% 15.55% 16.36% 41.49% 58.70% 42.35% 88.37% 118.17% 123.62%Selling, general and administrative expenses 31.55% 28.72% 16.84% 27.08% 37.87% 58.62% 42.34% 72.64% 115.30% 168.77%
Income from operations 44.87% 31.76% 10.85% -10.83% 51.56% 58.94% 42.37% 152.72% 130.77% 28.78%Interest & other expense, net
Income before income taxes 44.02% 32.15% 17.91% -21.50% 50.70% 79.19% 36.84% 211.36% 126.35% 12.32%Provision for income taxes(1) 48.22% 13.50% 12.51% -13.19% 81.45% 51.70% 70.50% 290.46% 204.90% 1713.89%
Net income 41.54% 46.37% 22.38% -27.26% 34.84% 97.67% 20.81% 183.96% 107.81% -8.05%
Percentage of revenueNet revenues 1 1 1 1 1 1 1 1 1 1 1
Cost of goods sold
0.51596133
0.50136898
0.52111194
0.510581
0.49709263
0.49940676
0.51663921
0.53488383
0.56106014
0.53136226
0.47374823
Gross profit
0.48403867
0.49863102
0.47888806
0.489419
0.50290737
0.50059324
0.48336079
0.46511617
0.43893986
0.46863774
0.52625177
Selling, general and administrative expenses
0.37351462
0.39302697
0.37931787
0.383351
0.36068755
0.36843755 0.3559471
0.34252684
0.35270623
0.38159435
0.35652747
Income from operations
0.11052405
0.10560405
0.09957018
0.106068
0.14221983
0.13215569
0.12741369
0.12258932
0.08623364
0.08704339
0.16972431
Interest & other expense, net
-0.0026082
-0.0021223 -0.002737 -0.00117
0.00123483
0.00338295
-0.0103717 -0.006253
-0.0191823
-0.0180424
-0.0154571
-0.0014015 -0.0011072
-0.0005967
-0.00851
0.00334509
0.00165317 -0.0002811 -0.0011015 0 0 0
Income before income taxes
0.10651436
0.10237451 0.0962365
0.096381
0.14679974 0.1371918
0.11732307
0.11743777
0.06705135
0.06900101
0.15426718
Provision for income taxes(1)
0.04070323
0.03801201
0.04160736
0.043669
0.06015059
0.04668798
0.04716192 0.0378885
0.01725019
0.01317861
0.00182445
Net income
0.06581113 0.0643625
0.05462914
0.052712
0.08664916
0.09050382
0.07016114
0.07954928
0.04980116 0.0558224
0.15244273
APPENDIX – FINANCIAL PROJECTIONS (I)
APPENDIX – FINANCIAL PROJECTIONS (II)
(In thousands, except per share amounts) 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001
Statements of Income data:
Net revenues 1,472,684 1,063,927 856,411 725,244 606,561 430,689 281,053 205,181 115,419 49,550 19,732
Cost of goods sold 759,848 533,420 446,286 370,296 301,517 215,089 145,203 109,748 64,757 26,329 9,348
Gross profit 712,836 530,507 410,125 354,948 305,044 215,600 135,850 95,433 50,662 23,221 10,384Selling, general and administrative expenses 550,069 418,152 324,852 278,023 218,779 158,682 100,040 70,280 40,709 18,908 7,035
Income from operations 162,767 112,355 85,273 76,925 86,265 56,918 35,810 25,153 9,953 4,313 3,349
Interest & other expense, net -3,841 -2,258 -2,344 -850 749 1,457 -2,915 -1,283 -2,214 -894 -305
-2,064 -1,178 -511 -6,175 2,029 712 -79 -226
Income before income taxes 156,862 108,919 82,418 69,900 89,043 59,087 32,974 24,096 7,739 3,419 3,044
Provision for income taxes(1) 59,943 40,442 35,633 31,671 36,485 20,108 13,255 7,774 1,991 653 36
Net income 96,919 68,477 46,785 38,229 52,558 38,979 19,719 16,322 5,748 2,766 3,008
Europe Projection(In thousands, except per share amounts) 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012Statements of Income data:
Net revenues 885,709 639,872 515,067 436,180 364,801 259,027 169,032 123,401 69,416 29,801 11,867
Cost of goods sold 456,992 320,812 268,408 222,705 181,340 129,360 87,329 66,005 38,946 15,835 5,622
Gross profit 428,718 319,060 246,660 213,475 183,461 129,667 81,704 57,396 30,469 13,966 6,245Selling, general and administrative expenses 330,825 251,487 195,374 167,210 131,579 95,435 60,167 42,268 24,483 11,372 4,231
Income from operations 97,892 67,573 51,285 46,265 51,882 34,232 21,537 15,128 5,986 2,594 2,014
Interest & other expense, net -2,310 -1,358 -1,410 -511 450 876 -1,753 -772 -1,332 -538 -183
-1,241 -708 -307 -3,714 1,220 428 -48 -136 0 0 0
Income before income taxes 94,341 65,507 49,568 42,040 53,553 35,536 19,831 14,492 4,654 2,056 1,831
Provision for income taxes(1) 36,051 24,323 21,431 19,048 21,943 12,093 7,972 4,675 1,197 393 22
Net income 58,290 41,184 28,138 22,992 31,610 23,443 11,860 9,816 3,457 1,664 1,809
APPENDIX – FINANCIAL PROJECTIONS (III)
International Expansion Strategies General Comparison
Risk Time Cost Financial Cost
Potential Profit
Control
Foreign Direct Investment(FDI)
High High High High High
Partnership Medium Medium Medium Medium Medium
Licensing Low Low Low Low Low
Works Cited Argersinger, Matt. "In Depth: Analyzing Under Armour." Motley Fool. N.p., 11
Dec. 2009. Web. 6 Dec. 2012. Betz, Brandy. "Hold On Under Armour Despite European Expansions." Motley Fool.
N.p., 05 Apr. 2012. Web. 6 Dec. 2012. <http://beta.fool.com/lynbetz/2012/04/05/hold-under- armour-despite-european-expansions/3396/>.
Brown, Abram. "Under Armour Sprints To Higher Sales And Profits, Lifts Full-Year Outlook." Forbes. Forbes Magazine, 24 July 2012. Web. 06 Dec. 2012. <http://www.forbes.com/sites/abrambrown/2012/07/24/und er-armour- sprints-to-higher-sales-and-profits-lifts-full-year- outlook/>.
Burke, Monte. "In An About-Face, Under Armour Will Introduce Cotton Apparel." Forbes. Forbes Magazine, 26 Jan. 2011. Web. 06 Dec. 2012.
<http://www.forbes.com/sites/monteburke/2011/01/26/in- an-about-face-under-armour-will-introduce-cotton- apparel/3/>.
Works Cited Cont. Burke, Monte. "Under Armour CEO Kevin Plank And His Underdog Horse Farm."
Forbes. Forbes Magazine, 07 Sept. 2012. Web. 06 Dec. 2012. Dreier, Fred. "Under Armour Flexing Its Muscles Overseas." Forbes. Forbes
Magazine, 04 Apr. 2012. Web. 06 Dec. 2012. <http://www.forbes.com/sites/freddreier/2012/04/04/under-armour-flexing- its-muscles-overseas/>.
"UABiz.com - Under Armour, Inc. - About Under Armour." UABiz.com - Under Armour, Inc. - About Under Armour. Under Armour, Inc., n.d. Web. 06 Dec. 2012. <http://investor.underarmour.com/company/about.cfm>.
Under Armour, Inc. Financial and Strategic Analysis Review. Rep. N.p.: n.p., n.d. Onesource. Web. 6 Dec. 2012.
<http://http://globalbb.onesource.com.proxy.lib.duke.edu/Web/Reports/ReportMainIndustry.aspx?SicCodeID=220505&Report=ALLMARKETRESEARCHREPORTS&Process=IP&Type=GetReport&FileFormat=PDF&ReportID=30114&FileName=FF90010.Pdf>.
Under Armour, Inc. Profile. Rep. N.p.: n.p., n.d. Hoover's Online. Web. 6 Dec. 2012. <http://subscriber.hoovers.com.proxy.lib.duke.edu/H/company360/companyPDFReport.pdf?companyId=106607000000000>.